Property Valuation
Capitalization rate (cap rate) is calculated as:
AGross income divided by sale price
BNet operating income divided by property value✓ Correct
CMonthly rent multiplied by 12 divided by assessed value
DVacancy rate minus operating expenses
Explanation
Cap Rate = Net Operating Income (NOI) ÷ Property Value. It expresses the relationship between a property's income and its value, allowing investors to compare investment properties. A higher cap rate generally indicates higher risk and/or lower price.
Related Tennessee Property Valuation Questions
- In Tennessee, an appraiser's 'limiting conditions' and 'assumptions' in a report are important because they:
- The principle of substitution states that:
- The cost approach formula is: Value = Land Value + (Cost New − Depreciation). If land value is $80,000, cost new is $250,000, and total depreciation is $40,000, what is the estimated value?
- The income approach to value is most appropriate for:
- The gross rent multiplier (GRM) approach is best suited for:
- An appraiser's 'scope of work' document must describe:
- A Tennessee appraiser who accepts an appraisal assignment contingent on the result exceeding a certain value is:
- Comparative Market Analysis (CMA) is typically prepared by a:
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